Dividend Stocks, High Yield Bonds, MLPs

Yields on treasury bonds are near zero and investment grade corporate bonds are yielding well below 5%. These traditional vehicles for income are in many cases yielding below the expected rate of inflation. In other words, in real terms, investors will be losing money by investing in traditional fixed income products. The question is where should income focused investors / retirees put their funds?

Don’t go for the highest dividend paying stocks. Go with stocks that pay an attractive dividend and consistently grow it. You want to own a quality company with good growth prospects. When you buy a company that pays a high dividend but does not have history of consistently raising dividends, you can often end up with a company in trouble. Often, the dividend is high only because the stock price has been beaten up and there may be a big dividend cut coming. On the other hand, a company that raises its dividend is making a strong positive statement about what it thinks about its future prospects, as reversing a dividend increase carries a major stigma for the company AND its management.

Source: Learn Bonds

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